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It Can Be Done

This post is about a non-FCPA case.

Yet, the attributes of this case apply to many FCPA cases.

A large corporate entity allegedly engages in criminal conduct.

The corporate entity agrees to a plea agreement, one that does not adequately reflect the seriousness of the conduct at issue.

Nevertheless, pursuant to the plea agreement, the corporate entity agrees to pay an eye-popping fine.

The DOJ issues a press release peppered with get-tough, accountability, wake-up call type of language.

The plea agreement gets filed with the court and the court rubber stamps the plea agreement.

Case closed.

This is what happened is the BAE bribery, yet no bribery case. That is what happened in the Siemens bribery, yet no bribery case. (Daimler was offered a deferred prosecution agreement, thus, it didn’t even have to plead to anything).

But that is not what happened in this case.

Rather, a federal court judge rolled up his sleeves, used the tools at his disposal, and rejected a plea agreement hashed out between the DOJ and the corporate entity because it was not “in the best interests of justice” and did “not serve the public’s interest” because it did not adequately address the “criminal conduct at issue.”

Kudos to Judge Donovan Frank (D. Minn.).

Judges assigned to future FCPA cases would be wise to follow his example.


On February 25, 2010, medical device manufacturer Guidant LLC, a wholly-owned subsidiary of Boston Scientific Corporation, was charged with criminal violations of the Federal Food, Drug, and Cosmetic Act (see here). According to the information, “Guidant concealed information from the U.S. Food and Drug Administration regarding catastrophic failures in some of its lifesaving devices.”

The DOJ release states, in part, “our message is clear: we will vigorously prosecute individuals and organizations who put profit over public health and safety by violating the law.”

On April 5, 2010, Guidant LLC (an entity that was formed two weeks before the DOJ filed the information) entered pleas of guilty to criminal violations of the Food, Drug, and Cosmetic Act (see here). Pursuant to the plea agreement, Guidant agreed to pay $296 million in criminal penalties.

The DOJ’s release states, in part, “Guidant’s guilty plea […] is about accountability,” “This successful prosecution serves as an important wake up call…,” and “The guilty plea […] should serve as a reminder and deterrent to those who would break the laws …”.

Enter Judge Frank.

The “type” of plea agreement at issue in the Guidant case was a Rule 11(c)(1)(C) agreement – the same “type” of plea agreements at issue in Siemens and BAE cases. In a Rule 11(c)(1)(C) plea agreement, the DOJ agrees that a specific sentence or sentencing range is the appropriate disposition of the case and such a recommendation is binding on the court once the court accepts the plea agreement.

Judge Frank noted that “normally, a court accepts or rejects a plea agreement at a plea hearing” (see here for his Memorandum Opinion and Order).

However, as reflected in Frank’s order, “whether to approve or reject a plea agreement is a matter confided to the sound discretion of the trial court” and a plea agreement can be rejected if the agreed upon sentence is inappropriate or if the resulting agreement is not in the best interest of justice.

Among other things, Judge Frank noted that the victims of Guidant’s conduct contend “that Guidant, as a company, does not respect the criminal justice system and should be required to do more than simply pay fines as a consequences for its criminal behavior.”

Judge Frank was also troubled by the lack of a presentence investigation report – he noted that the plea agreement “specifically states that a presentence investigation report is not necessary because the plea and sentencing hearings, together with the record and the Plea Agreement, ‘will provide the Court with sufficient information concerning Guidant, the crime charged in this case, and Guidant’s role in the crime to enable the meaningful exercise of sentencing authority by the Court…” However, Judge Frank noted that a presentence investigation report would have be useful in determining the appropriate sentence.

[A presentence report was waived in both the Siemens (here) and BAE (here) agreements]

Judge Frank is not the only federal court judge to recently reject a plea agreement or SEC settlement.

Judge Jed Rakoff (S.D.N.Y.) did it last September in the SEC v. Bank of America case. Among other things, Judge Rakoff noted that the SEC – BofA settlement left the distinct impression that it was a “contrivance designed to provide the SEC with the façade of enforcement and the management of [BofA] with a quick resolution of an embarrassing inquiry…” He further noted that the settlement “suggests a rather cynical relationship between the parties” in that “the SEC gets to claim that it is exposing wrongdoing on the part of [BofA] in a high-profile merger” and “[BofA’s] management gets to claim that they have been coerced into an onerous settlement by overzealous regulators.” According to Judge Rakoff, “all this is done at the expense, not only of shareholders, but also of the truth.” [In February 2010, Judge Rakoff did “reluctantly” approve a revised SEC – BofA settlement yet stated that the settlement, “[w]hile better than nothing,” was still “half-baked justice at best.”

Judge Cormac Carney (C.D.Cal.) did it last September in the case of Dr. Henry Samueli, the co-founder and former chief technical officer of Broadcom, who pleaded guilty to criminal charges for making false statements in testimony before the SEC relating to its investigation of the alleged stock-options backdating at Broadcom. Under a grant of immunity, Samueli testified as a government witness at the trial of another Broadcom executive and after hearing Samueli testify Judge Carney vacated Samueli’s prior guilty plea and dismissed the criminal charges against him. Judge Carney noted that there was “no evidence … to suggest that Dr. Samueli did anything wrong, let alone criminal.” “Yet,” Judge Carney noted, “the government embarked on a campaign of intimidation and other misconduct to embarrass him and bring him down” including crafting “an unconscionable plea agreement pursuant to which Dr. Samueli would plead guilty to a crime he did not commit and pay a ridiculous sum of $12 million to the United States Treasury.”

As the above (and other) examples demonstrate, plea agreements can be rejected by trial court judges either because they are “too soft” or “too hard.”

Yet, to my knowledge, no FCPA plea agreement has ever been rejected by a trial court judge.

Some probably should not.

Some probably should.

Judges assigned to future FCPA cases would be wise to follow the above examples, roll up their sleeves, use the tools at their disposal, and critically analyze whether the plea agreement, given the allegations in the charging documents, serve the “public’s interest” and adequately address the “criminal conduct at issue.”

Some FCPA plea agreements (not to mention, non and deferred prosecution agreements) are “too hard” in that it is debatable whether the conduct at issue even violates the FCPA. Some FCPA plea agreement – most notably the BAE and Siemens plea agreements – are “too soft.”

Both contribute to the facade of FCPA enforcement and, in many cases, federal court judges have tools at their disposal to expose the facade of FCPA enforcement.

It can be done.

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